TECO's supply chain is mainly distributed in Taiwan and mainland China, and its products are mechanical and electrical and home appliances under the TECO brand. The upstream of the mechanical and electrical supply chain is the bulk raw material supplier, and the downstream is the direct sales of major customers and the global distribution network. The upstream of the home appliance supply chain is raw material or key component suppliers, and the downstream is Taiwan’s distribution network, malls, and online e-commerce platforms.
To manage supply chain, TECO classifies suppliers by following definitions:
The total purchase from Tier-1 suppliers is about NT$5.41 billion, of which the purchase amount from significant Tier-1 suppliers is about NT$2.09 billion, accounting for about 38.56% of the total procurement.
Total number of Tier-1 suppliers |
151 |
Total number of significant suppliers in Tier-1 |
101 |
% of total spend on significant suppliers in Tier-1 |
38.56% |
Total number of significant suppliers in non Tier-1 |
10 |
Total number of significant suppliers (Tier-1 and non Tier-1) |
111 |
Supplier Business Conduct
In order to ensure that suppliers fulfill their corporate social responsibilities, TECO has not only demanded suppliers to provide competitive quality, delivery date and technology by implementing the appraisal system, other in-depth management measures have been applied, including: formulation of the supplier CSR clause, establishment of the supplier appraisal form, strategy to increase the ratio of local procurement, as well as the signing of "Prohibited /Restricted Substance Guarantee," "Declarations of Non-Use of Conflict Minerals" and "Letter of Commitment to Human Rights and Environmental Sustainability." and "Supplier Code of Conduct". Suppliers are required to comply with it when signing or changing contracts. By regularly reviewing the supplier's economic, social, and environmental practices, TECO can ensure consistency with the supplier's code of conduct and avoid potential conflicts with sustainability-related requirements.
Supplier Management and Indicators
TECO screens suppliers through the four aspects of environment, society, corporate governance, and operational performance (as shown in the table below), which is part of the TECO supplier assessment form, and all suppliers (100%) are required to carry out Appraisal and counseling, to confirm the status, ability and potential of the supplier and the needs to improve operational performance.
The quality control team supervises each business department to formulate the "Third Party Supplier Assessment Implementation Procedure" as a sustainable risk and assessment operation. Identifies negative ESG in accordance with national regulation risks, industry specific risks, or business risks (as shown in the table below). If any of the first six items do not meet the TECO's specifications, it is regarded as a significant supplier who has negative ESG risks.
The ESG Office is one of the key department to supervise ESG implementation.The ESG Office head, equivalent to CSO, is the highest decision-maker for suppliers’ ESG strategy.
Definition of ESG high risk |
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Risk #1 |
Wastes, water, gas emission and waste management process should comply with regulations. |
Environment |
National Regulation Risk |
Risk #2 |
Was there any major occupational safety issues or cases? |
Environmental and Social |
Industry Specific Risks |
Risk #3 |
Are there any process to handle harmful materials (for example RoHS & REACH) and how to store and report the usage of chemical material? |
Environment |
Product Specific Risks |
Risk #4 |
Does the supplier violate social responsibilities related to labor human rights? |
Social |
National Regulation Risk |
Risk #5 |
Does the supplier violate corporate governance and integrity management code? |
Governmence |
National Regulation Risk |
Risk #6 |
Does the supplier implement measures to reduce greenhouse gas emissions? |
Environment |
Industry Specific Risks |
Risk #7 |
Business performance indicators such as delivery capabilities, quality control, stability, and cost-effectiveness. |
Business |
Industry Specific Risks |
Supplier Audit Procedure
Before trading |
TECO ensures suppliers meet relevant quality, environmental, safety and health criteria and their products conform to green management and control. TECO has actively assisted its suppliers to improve their quality by obtaining ISO 9001, TS16949 international certifications. It has also demanded suppliers to design green, eco-friendly products, as well as implement ISO 14001, ISO 45001 or other hazardous substance control capabilities. |
Contract signing |
Signs the "Letter of Commitment to Human Rights and Environmental Sustainability" which allows TECO to terminate the contracts if any violation of social commitment is discovered. Signing rate reaches 99% |
On-site audit |
For new or high-risk, tier 1 or critical suppliers identified through risk identification, TECO forms evaluation teams through in-plant R&D, quality control, manufacture, procurement, safety and environmental, and audit related personnel to perform the on-site audit. |
During trading period |
All suppliers are assessed and audited every three years, and those with better ESG performance are considered as priority partner for continuous cooperation. If the key items or the minimum scoring standards cannot be met, corrective measures for non-conformities will be issued to suppliers, whom must submit a corrective report based on the actual situation within 30 days after receiving notice. After TECO reviews, the item will be included in follow up audit. The contract can be terminated to ensure compliance with TECO norms and identified potential risks if the criteria still can't be reached. |
A two-stage evaluation is carried out for critical suppliers. The first stage is to identify whether the suppliers themselves have ESG system or ISO certification, according to the manufacturing or trading business type they belong to.
If high-risk suppliers are identified in the first stage, TECO carried out the second stage. Suppliers will be evaluated on the TECO official supplier scoring scale, of which ESG accounts for 29.3% weights
Items |
Weighting |
Ratio |
ESG |
Responsible Unit |
Description |
Marketing Process |
15 |
4.4% |
G |
Procurement |
Encompasses business conduct principles |
Design & Development Process |
41 |
12.0% |
|
R&D |
Encompasses schedule control and design capabilities |
Document & Data Management |
20 |
5.9% |
|
QC |
Encompasses document life cycle management and audit efficiency |
Operation Management |
10 |
2.9% |
G |
Procurement |
Encompasses organizational duties and responsibilities and monitoring mechanism |
HR & Environmental Safety |
38 |
11.1% |
E, S |
Health & Safety |
Encompasses ISO management, pollution control, water and energy conservation, labor rights, regular communication, prohibition of forced labor and child labor, and discrimination |
Production Management |
14 |
4.1% |
|
Production Management |
Encompasses production scheduling management and handling of emergencies |
Procurement Process |
30 |
8.8% |
E, G |
Procurement |
Encompasses supplier evaluation system and control of prohibited substances and conflict minerals |
Warehousing Process |
23 |
6.7% |
|
Production Management |
Encompasses MRP system, control of non-conforming materials, and storage criteria management |
Equipment Management |
21 |
6.2% |
|
Production Technology |
Encompasses maintenance, spare part management, and mold life cycle management |
Measuring Equipment |
21 |
6.2% |
|
QC |
Encompasses calibration management, lab personnel control, and MSA analysis |
Process Control |
33 |
9.7% |
|
Production Technology |
Encompasses relevant SOP, rework management, and on-site 5S management |
Quality Control |
54 |
15.8% |
|
QC |
Encompasses quality assessment, sampling management, authorities and responsibilities in the handling of non-conforming items, five core management tools, and technician certificates |
Internal Auditing Process |
7 |
2.1% |
G |
QC |
Encompasses audit plans and tracking of corrective actions for detected anomalies |
Continued Improvements |
14 |
4.1% |
|
QC |
Encompasses continued improvement of SOP and linkage to prevention of recurrence and control plans |
In the aspect of corporate social responsibility, TECO sets “Labor Human Rights Social Responsibility” and “Environmental protection” as top two assessment items.
ESG Goals |
|
Management Strategy |
Labor Human Rights Social Responsibility |
Ensure that all suppliers treat employees in accordance with TECO’s human rights expectations |
|
Environmental protection |
|
|
2023 Supplier Assessment Result
TECO audits suppliers once every three years and conducts a two-stage evaluation for key (central purchase) suppliers. In the first stages whether the supplier has its own ESG system or ISO certification is identified, and at the same time screening is carried out according to its category of manufacturing or trade. The second stage of evaluation is carried out after the identification of high-risk suppliers in the first stage. In the second stage, TECO’s official supplier rating scale is used for evaluation, of which ESG accounted for 29.3%
Supplier GHG Inventory Assessment Results
In 2022, a total of 57 suppliers have conducted social and environmental assessments (including 44 significant suppliers). There is no negative impact found in social assessment, however, not performing GHG inventory is identified as significant environmental negative impact among SME suppliers.There is no trading relationship termination from failure ESG engagements.
Total number of suppliers assessed. (For GHG Inventory) 2023 target 50% (75) |
102 |
% of significant suppliers assessed (Who don't not have GHG data) |
91.89% |
Number of suppliers assessed. (Need to conduct GHG) |
53 |
% of suppliers without GHG but agreed on improvement plan |
100% |
Number of suppliers conducted GHG |
0 |
Provided guidance on identifying important suppliers that did not comply with TECO's ESG risk projects and had not yet conducted GHG inventory, and assisted 53 suppliers in conducting simple inventories.
Implemented 3 internal education and training sessions totaling 11 hours, covering basic environmental management new knowledge and emission reduction sharing sessions.
We also conducted a series of ISO14064 empowerment education and training for suppliers. In addition to assisting in coaching and improvement, 5 suppliers were provided with actual on-site guidance and inspections.
This supplier development plan was launched in January 2023. All five suppliers will complete greenhouse gas emission inventories by the end of 2023 as a key target for subsequent emission reduction and improvement, and the company will include it in KPI management in 2024 to continue. Conduct inventory training on suppliers and observe whether they implement emission reduction.
Coverage and progress of suppliers with Capacity Building Programs
TECO helps suppliers understand ESG trends and improve their ability to identify risks and improve methods of energy conservation and carbon reduction through physical seminars from time to time, and shares the latest international trends, ESG benchmark corporate energy product development, energy conservation and emission reduction methods and Management System.
Total % of significant suppliers supported in corrective action plan implementation. 2023 target 50% (51) |
53 (100%) |
% of significant suppliers supported in Capacity Building Programs 2023 target 5% (5) |
5 (4.5%) |
A total of 3 sustainable supplier seminars are held in 2023, and a total of about 75 small and medium-sized enterprise suppliers from various business units will be invited for physical two-way communication and sharing. TECO also provides procurement department employees with the opportunity to attend three sustainable supplier seminars to receive education and training on ESG related supply chain management.
It also provides an ESG online diversified learning platform through the TECO e-Digital Academy so that all employees can learn and conduct ESG courses to increase their awareness of sustainable supply chains.
Hazardous Substance Policy and Material Management
Implement the management of the prohibition of environmentally harmful substances. In addition to choosing conflict-free metals as raw materials for each product design stage, a hazardous substance management mechanism is also established to clearly declare that the company, suppliers, contractors, and partners shall follow. TECO promises that by 2023, 100% of motors and home appliances and their raw materials will comply with international mandatory regulations and management
Regulatory Trends |
Restriction of Hazardous Substances in Electrical and Electronic Equipment Directive, (RoHS), Registration, Evaluation, Authorization and Restriction of Chemicals, (REACH) must be included in the management measures at least one year before implementation. |
Management Mechanism |
The production sites are all in compliance with the group's management measures for prohibiting/restricting the use of environmentally hazardous substances, and the subsidiaries and affiliated companies have consistent implementation standards as well. Raw materials, parts, processed products, and consumables must be followed. At present, 10 categories of prohibited/restricted hazardous substances are controlled, covering non-steel, steel, plastic packaging, paper packaging, wood packaging, foam packaging and process chemicals. |
Renew and Implementation |
When there is a major change in the external norms, it will be discussed across business departments and re-promulgated. The frequency is about once a year. |
Disclosure |
All business groups follows TECO policy, and fully control 10 categories of prohibited/restricted hazardous substances. |
Non-use of conflict mineral commitment
TECO has formulated a "Declaration of Non-Use of Conflict Minerals" to ensure the proper handling of conflict mineral issues. Suppliers are required to conduct detailed surveys of supply chains to ensure that metals such as Gold (Au), Tantalum (Ta), Wolfram (W), Cobalt (Co), and Tin (Sn) are not acquired from non-governmental military groups, illegal organizations, and mining areas in the conflict zones of the Republic of Congo or through smuggling. By effectively identifying and tracing the source of materials, TECO is able to prevent the use of conflict minerals in its production. Metals exported by the following nations do not meet conflict-free norms as determined by the US Security Council: DRC, Rwanda, Uganda, Burundi, Tanzania, Kenya.
100% procurement of non-conflict raw materials |
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